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July 20, 2021 - Articles
Depending on the specific holding of companies that own Portuguese real estate, Portuguese taxation on capital gains may or may not apply. Specific assistance should be sought from a legal and tax advisor.
IMT - Property Transfer Tax
Paid on the acquisition of a property by the purchaser prior to completion. On properties for habitational purposes, the rate varies according to the purchase price. Specifically, for properties valued at over EUR 1m, a 7.5% rate applies. On rustic land, the rate is 5%, while on plots for building or other property types, the rate is set at 6.5%. This rate includes the acquisition of shares in companies that own real estate (where certain criteria are met), which now, in a change enacted for 2021, is also applicable to the acquisition of shares in corporations (i.e., entities formed as a “sociedade anónima – S.A.”). A 10% rate is also applied to properties acquired (directly or indirectly) by offshore entities which are included in the Portuguese blacklist.
Stamp Duty, Notary and Registration Fees
To be paid by the purchaser prior to signing the notarial deed and the registration of the property into the buyer’s name. Stamp duty is levied at a 0.8% rate of the sales price. Registration of the acquisition costs €250,00 Notary and lawyer fees vary depending on the value of the purchase and complexity of the deal.
IMI - Annual Property Tax
Payable in two or three instalments per year (depending upon the total value). This tax is fixed annually but can vary between 0.3% to 0.45% depending upon the council where the property is located. Loulé is currently taxed at 0.3%. The IMI for rustic properties is 0.8%. A 7.5% rate also applies where the property is held (directly or indirectly) by offshore entities which are included in the Portuguese blacklist.
“For non-resident individuals, CGT is levied at a 28% rate. Residents are not taxed on 50% of their capital gain and the other 50% is added to their usual annual income tax return.”
AIMI - Additional Municipal Property Tax
Introduced in 2017, AIMI is applicable to the combined total value of the ratable value of properties (VPT) of all properties owned by each individual. Up to the value of EUR 600,000 there is no AIMI to pay. For values between EUR 600,000 and EUR 1 million it is 0.7%. On values from EUR 1 million up to 2 million the tax is EUR 2,800 (0.7% of EUR 400,000) plus 1% on the value in excess of EUR 1 million. On values above EUR 2 million the tax is EUR 2,800 (0.7% of EUR 400,000) plus 1% on the value in excess of EUR 1 million up to 2 million plus 1.5% on the value in excess the 2 million.
AIMI for corporate owned properties is 0.4% of the ratable value. Similarly to IMI, a 7.5% rate also applies to real estate owned by offshore entities which are included in the Portuguese blacklist.
AIMI does not apply to non-urban properties and properties registered as commercial, industrial, or service providing.
Capital Gains Tax
For non-resident individuals, CGT is levied at a 28% rate. Residents are not taxed on 50% of their capital gain and the other 50% is added to their usual annual income tax return. This tax is calculated on the difference between the sales price and either the purchase and/or construction costs of the property, (index linked) or its first ratable value (index linked), whichever is the highest. Costs can be offset against this tax including invoices of certain refurbishments, taxes, notary and registration fees as well as real estate agency fees. If the property you are selling is your main residence and you reinvest the proceeds of the sale within 36 months in an EU/EEA territory, you can avoid this tax.
For non-resident companies, CGT upon direct disposal of real estate properties is levied at a 25% rate. The taxable basis is computed in a similar way as established for resident individuals. CGT also applies to resident companies, at rates ranging between 21% and 31.5% (depending on the applicable State and municipal surcharges). In any case, a reinvestment relief regime may potentially be applicable, which can limit the gains subject to tax (depending on meeting certain criteria).
Depending on the specific holding of companies that own Portuguese real estate, Portuguese taxation on capital gains may or may not apply. Specific assistance should be sought from a legal and tax advisor.
Inheritance Tax
Between close direct relatives (i.e., spouses and direct descendants / ascendants), there is no inheritance tax in Portugal. On gifts, a 0.8% stamp duty based on the VPT must be calculated. Other inheritance or gift situations are subject to stamp duty at the rate of 10% of the VPT.
